To begin with, Brexit has been a tumultuous affair. Aside from polarising the country and creating political disunity, the situation has been looking even more bleak as the UK finds it difficult to find replacement trade deals with its allies and partners.
To this effect, several major American banks are looking to make the move to Europe. According to The Guardian:
Goldman Sachs has begun to make plans for Brexit by leasing space in a new Frankfurt tower block that could hold up to 1,000 staff.
The reason for the move is that:
“This expanded office space will allow us to grow our operations in Germany to continue serving our clients, as well as provide us with the space to execute on our Brexit contingency plan as needed,” Goldman Sachs said.
It is looking more and more like that contingency plan will be needed, but it isn’t only Goldman that is worried. According to Reuters, Citi, JP Morgan and Morgan Stanley are all considering moves to the German financial hub.
The prospect of hosting so many major banks is a major boon to the Germans:
A recent study commissioned by Frankfurt’s chief promoter predicted there would be 10,000 new bankers in the city within four years and that their arrival could create tens of thousands of additional jobs, from estate agents to building workers.
The consequences of such a move would be quite far reaching. On a macro level, Germany will likely replace London as Europe’s financial hub and give Germany even more primacy in Europe’s economy. On an market level, the lack of confidence the banks have in the UK (demonstrated by their plans to relocate) could severely undermine the markets in London and change the investment sphere in the country for some time.
This week has not been easy for Britain, as it has struggled with numerous failed trade talks as well as a weak showing by Prime Minister Theresa May on Wednesday. Investors should analyse Wall Street’s move from London with interest; it could change the investing game in Europe for a very long time.
To read The Guardian’s article on Goldman’s new Frankfurt offices, click here.
To read Reuters’ article on the major banks moves to Germany, click here.
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